Under the Bhc franchise agreement, what constitutes a material default due to cross-defaults?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Any default by Franchisee (or any person/company or Affiliated Entity) under the terms and conditions of this Agreement or any lease or sublease, or any other agreement between Franchisor or its affiliate, and Franchisee, shall be deemed to be a material default of each and every said agreement, and furthermore, in the event of termination, for any cause, of this Agreement, or any other agreement between the parties hereto, including, but not limited to, the MFA or MTRA, between the parties hereto, Franchisor may, at its option, terminate any and all said agreements. No right or remedy which Franchisor may have (including termination) is exclusive of any other right or remedy provided under law or equity and Franchisor may pursue any rights and/or remedies available.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to the 2025 Bhc Franchise Disclosure Document, a cross-default occurs when a franchisee (or any affiliated entity) violates the terms of the franchise agreement, any lease or sublease, or any other agreement with Bhc or its affiliates. This violation is considered a material default under all agreements.
Specifically, if a franchisee defaults on one agreement, Bhc can consider that a default on all agreements. Furthermore, if any agreement between the franchisee and Bhc is terminated for any reason, Bhc has the option to terminate all other agreements as well. These agreements include, but are not limited to, the Multi-Unit Master Franchise Agreement (MFA) or Multiple Target Reservation Agreement (MTRA).
This clause gives Bhc broad authority to terminate multiple agreements if the franchisee fails to meet the obligations of any single agreement. It is important for a prospective franchisee to understand the implications of this cross-default provision, as a default in one area of the franchise operation could trigger a complete termination of the franchise relationship.